Financial Guide for SMEs - SME Corporation Malaysia

Financial Guide for SMEsMark-upMark-up is the amount that you sell your goods above the cost to purchase ormanufacture those goods. It is generally only a meaningful figure when referringto the sale of products rather than services. It can be useful to use mark-upcalculation to ensure that you set the selling price at a level that covers all costsincurred with the sale.Mark-up is calculated as follows:Sales less cost of goods soldPercentage value = X 100Cost of goods soldBreak-even CalculationThe break-even calculation shows how much sales are required, in either value orunits, before all the expenses are covered and actual profit begins.This simple calculation is used to find where profit really starts. The break-evenpoint is calculated as follows:Break-even (RM) =[Expenses / 1 less (Cost of Goods Sold)](Net Sales)Break-even (%) = Expenses / (Unit selling price less Unit cost to produce)If we remember Adam’s income statement for year one (in Chapter 1), we canuse this to calculate the profi tability measures for his business.41Chapter 2-5 p22-65 Eng.indd 418/15/11 5:01:55 PM